Bengaluru-based Instamojo stopped operations of its payment gatewaybusiness to comply with RBI rules after receiving the final status on its application this September.To ensure business continuity for merchants the company has onboarded licenced PAs. Instamojo claims to have a total of 2.5 million merchants registered on its platform, with almost 25,000 active in September, before the RBI returned its application. Instamojo has so far onboarded two licenced PA partners and is expected to onboard two more in the coming months. The company, however, declined to identify the two new PA partners.
News website The Morning Context was the first to report about RBI returning Instamojo’s PA application.
“According to the rules, entities have a cool-off period of a year before they reapply for the (PA) licence. Last year, of course, the RBI made an exception. We will reapply for the licence after a year, and RBI has encouraged us to do so,” cofounder and chief operating officer Akash Gehani told the publication. “We have alerted our merchants about the disruption and have started processing payouts with new partners. The ones impacted now will only be in double digits,” Gehani said.
Why RBI rejected Instamojo’s application
The central bank is said to have decided against awarding the PA aggregator licence to Instamojo as the company has not met its net worth criteria. “It was due to the eligibility criteria related to the net worth of the company. There was a difference in the way RBI calculated and how we arrived at the net worth (of the PG business) in 2021. But our conversation with the RBI has been positive and good so far,” he added.
The move is reported to come as a big blow for the 11-year-old company, which provides ecommerce tools and payment services, as several of its merchants were left in the lurch regarding their payment settlements.
The failure to procure the PA licence is also likely to impact Instamojo’s revenues as nearly three-fourths of it comes from payments.
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